INTERVENTION PLAN TAILORED FINANCIAL SERVICE PRODUCTS FOR MICROPROCESSORS VALUE INITIATIVE PROGRAM...
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Transcript of INTERVENTION PLAN TAILORED FINANCIAL SERVICE PRODUCTS FOR MICROPROCESSORS VALUE INITIATIVE PROGRAM...
INTERVENTION PLAN
TAILORED FINANCIAL SERVICE PRODUCTS
FOR MICROPROCESSORS
VALUE INITIATIVE PROGRAM
Stage of Intervention: Entry
INTERVENTION RATIONAL
The financial package for Equipments will
contribute towards increased MEs output and
sales (enterprise level change), increased ME
participation and market output (VCD change) and increased productivity and
access to local markets amongst the excluded poor
and HIV affected communities in urban areas (social change)
.
MICROPROCESSORS/VENDORS ACCESS EQUIPMENT
SOCIAL
CHANGE
ENTERPRISE LEVEL CHANGE
VCD
CHANGE
TAILORED FINANCIAL SERVICE PRODUCTS FOR MEs
INCREASE IN JUICE OUTPUT AND SALES
• Passion fruit is a very popular fruit in the domestic market either used as fresh fruit or for processing into juices.
• Demand in East African markets for fresh and processed fruit products such as passion fruit juice is growing at more than 10% per annum. In Kenya, domestic demand is increasing and current supply is unable to fill the demand.
• The leading passion fruit processors in Kenya include
Kevian Ltd, Milly processors and FIPS Ltd, Ruaraka.
MARKET ANALYSIS
• Extensive juice extraction is also carried out at household and cottage industries. Passion, orange, mango, papaya are the major processed and utilized fruit juices.
• At micro-value add level, processing is done
manually or by use of juice blenders bought from local supermarkets.
• Value addition of passion fruits through micro processing presents an excellent opportunity to create new investment and employment for the poor Ampath clients in urban and peri-urban settings
MARKET ANALYSIS
o However, inadequate access to credit for equipment is a generic constraint amongst micro value add enterprises in Kenya , contributing to low production volumes and poor juice quality
o In addition entrepreneurs may also not know where to get the processing equipment and better linkages need to be created between the technology providers and users.
o Majority of Kenyan consumers may not be aware of nutritional and health benefits of consuming passion fruit products or other natural fruit products as compared to synthetic or imitation products
o VIP Ampath through Fintrac has recently launched a detailed market research initiative on the passion fruit value addition to among others study financial markets and potential financing models. (See attached market study plan)
o Some preliminary research on financial markets reveals the following …………..
MARKET ANALYSIS
Microprocessors Financing Needs
– The Demand Side:
oTypical amounts ranges from Kes 10, 000 - 200,000oThe rationales for these financing needs are
extremely varied. They include:o purchasing equipment and licenses; o building up of working capital; and o hiring and training of personnel
MARKET ANALYSIS
Demand side constraints
o Lack of adequate information, communication and dissemination of information on availability of SMEs financing
oComplex bank procedures that require reading and writing skills
o Lack of entrepreneurial skills and management capacity to amongst SMEs
o The costs of getting a loan are high, interest rates are very high
o Lack of formal collateralo Lack of registered credit history and business records
MARKET ANALYSIS
Issues in Accessing Financing by Microprocessors
– The Supply Side
o Small and short-term loans initially required by small businesses are considered costly and of high risk by formal financial institutions
o High loan delinquency amongst SMEso Need to train most MFIs operational staff and
management to appreciate and be able to handle financial services requirements of SMES
o Policy and regulatory constraints
MARKET ANALYSIS
Issues in Accessing Financing by SMEs
– The Supply Side cont’d….o Absence of credit referencing systems in the
country/credit history. o Lack of cost-effective ways to quantify credit
risk-most banks limit their risk with the SME market either by not lending at all or by charging high interest
oMany SMEs are reluctant to seek credit/loan phobia
MARKET ANALYSIS
Sources of financing for SMEs in Kenya:
o Banks, MFIs e.g.: K-Rep Bank, Equity Bank, Family Bank, Cooperative Bank and FINA Bank
o SACCOso Rotating and Savings Credit Associations (ROSCAs)o Accumulated Savings and Credit Associations
(ASCAs)o Village Banks, friends and family, and informal
lenderso Non Governmental Organizations
MARKET ANALYSIS
Willingness and ability to pay for Credit
Are urban SMEs able and willing to pay for credit?Main categories of urban SMEs that VIP Ampath is targeting:
(1) Microprocessors who are able and willing to pay for credit:- Once exposed to suitable financial service products (e.g. equipment package) from finance institutions, they are enthusiastic about it and willing to pay.
o Their sources of repayment include:o Microenterprise income. o Sale of assets o Household members’ salaries and other earned income o Remittances or domestic money transfers
MARKET ANALYSIS
(2) Resource poor and vulnerable Ampath clients in urban settings:o These are the very poor and vulnerable of AMPATH
clients (PLWAS) without formal bank collateralo VIP Ampath will assist them to graduate to micro-
processing via a stepped –up approach [see next slide]
o VIP Ampath will negotiate with Equity bank to accept collateral substitutes such as group liability/social guarantee for the clients, household items and or their credit history/reputation with Ampath.
MARKET ANALYSIS
juice processing technology,
hygiene/quality, Biz
Management
FACILITATIONKBS
certification, municipal biz
permit, credit & savings, public
health certification
OUTPUT
1 glass ready to drink is KES 40 (200ml) or KES 200/liter; aim for
revenue of KES 4, 000 /day.
Approximately KES 2, 000 /day.
Experienced, rents a room or buys cool
box,
savings requirement
.
Increased production capacity,
Increased income
Graduation to a microprocessor and
business service markets
.
Stage 1Very poor and
Vulnerable
TRAINING
GraduationStage 2
Vulnerable
Sequencing for Graduation to Micro-processing for the Poor Ampath Clients in Urban and Peri-urban Areas
General Strategy
Working with financial institutions to develop suitable
financial packages/products and stimulating demand in the value
chain.
INTERVENTION
KIRDI-TECHNOLOGY
DEVELOPER
& TRAINER
MICROPROCESSORS
FINANCIAL INSTITUTIONS: ROOT SOURCES OF FIINANCE
Financial institution provides Equipment loans to microprocessors via the technology developer. Microprocessors repay the loan directly to the bank Financial institution provides Equipment loans to microprocessors via the technology distributor Microprocessors repay the loan directly to the bank
SUPERMARKET
(TECHNOLOGY
DISTRIBUTER)
Equipment- Such as blenders
1
2
BUSINESS MODELS FOR FINANCIAL SERVICE PRODUCTS
2
Equipment and Training
Microprocessors
Financial
Package
Microprocessors
Financial
Package1
Loan
rep
aym
ent
Loan
rep
aym
ent
Equipment
Increase ME participation & Increase market output
Increase income for Juice vendors/MPs; increase supply of passion juice
Vendors/MPs access and use equipments
% increase in # of MEs participating in value chain;% increase in market output
% increase in monthly sales volume/value per vendor/MP
# of vendors/MPs accessing and using equipment
INDICATORS
MFI provides equipment loans to
microprocessors/juice vendors via a
technology developer/ training provider.
Microprocessors repay the loans directly to
the MFI
CAUSAL CHAIN FOR TAILORED FINANCIAL SERVICE PRODUCTS FOR MICROPROCESSORS/VENDORS – PILOT PHASE
% increase in monthly output of quality Juice
BUSINESS MODEL # 1
Microprocessors/Vendors
Technology developer MFI
Equipment LoanEquipment and training
Loan repayment
Increase ME participation & Increase market output
Increase income for Juice vendors/MPs; increase supply of passion juice
Vendors/MPs access and use equipments
% increase in # of MEs participating in value chain;% increase in market output
% increase in monthly sales volume/value per vendor/MP
# of vendors/MPs accessing and using equipment
INDICATORS
MFI provides equipment loans to
microprocessors/juice vendors via a
technology developer/ training provider
Microprocessors repay the loans directly to
the MFI
CAUSAL CHAIN FOR TAILORED FINANCIAL SERVICE PRODUCTS FOR MICROPROCESSORS/VENDORS – MARKET UPTAKE PHASE
% increase in monthly output of quality Juice
BUSINESS MODEL # 1
Many microprocessors /Vendors
Technology developer Many MFIs
Equipment LoanEquipment and training
Loan repayment
Increase ME participation & Increase market output
Increase income for Juice vendors/MPs; increase supply of passion juice
Vendors/MPs access and use equipments
% increase in # of MEs participating in value chain;% increase in market output
% increase in monthly sales volume/value per vendor/MP
# of vendors/MPs accessing and using equipment
INDICATORS
MFI provides equipment loans to
microprocessors/juice vendors via a
technology distributer. Microprocessors repay
the loans directly to the MFI
CAUSAL CHAIN FOR TAILORED FINANCIAL SERVICE PRODUCTS FOR MICROPROCESSORS/VENDORS – PILOT PHASE
% increase in monthly output of quality Juice
BUSINESS MODEL # 2
Microprocessors/Vendors
Technology Distributer MFI
Equipment LoanEquipment
Loan repayment
Increase ME participation & Increase market output
Increase income for Juice vendors/MPs; increase supply of passion juice
Vendors/MPs access and use equipments
% increase in # of MEs participating in value chain;% increase in market output
% increase in monthly sales volume/value per vendor/MP
# of vendors/MPs accessing and using equipment
INDICATORS
MFI provides equipment loans to
microprocessors/juice vendors via a
technology distributor. Microprocessors repay
the loans directly to the MFI
CAUSAL CHAIN FOR TAILORED FINANCIAL SERVICE PRODUCTS FOR MICROPROCESSORS/VENDORS - MARKET UPTAKE
% increase in monthly output of quality Juice
BUSINESS MODEL # 2
Many microprocessors /Vendors
Technology distributor Many MFIs
Equipment LoanEquipment and training
Loan repayment
MARKET ENTRY
• Pinpoint geographic area for the pilot• Assess demand and supply of
equipment loans• Conduct stakeholder sensitization
workshops• Identify and assess participants-
Technology developer and distributers , microprocessors /vendors and MFIs
• Monitoring and Evaluation
INITIAL OUTREACH STEPS
MARKET ENTRY- PROGRESS
• 5 pilot areas i.e. Eldoret, Mosoriot, Chulaimbo, Kitale and Webuye have been identified
• Negotiations with Equity bank on suitable financial products on-going
• Baseline survey conducted in 14 target sites
INITIAL OUTREACH STEPS
What is the messages?
• VIP, objectives, approaches, facilitative role
• Passion fruit value chain, constraints and sustainable solutions
• ‘Why value addition -market opportunities, high urban demand, income generation opportunity for the micro value add enterprises
• The existing demand for credits and equipments:- business opportunity
What forums/media?
• Workshops, Stakeholder meetings
• Agricultural exhibitions
• Informal discussions• VIP fliers
What’s on offer?
•MFIs: expanded client base• Vendors/MPs : improved access to equipment, increased sales and income• Technology provider and distributors : increased sales and profits
Marketing Strategy
PILOT PHASE
Business Models to be tested
1. Financial institutions provide Equipment loans to microprocessors via the technology developer. Microprocessors repay the loan directly to the bank
2. Financial institutions provide Equipment loans to microprocessors via the technology distributor. Microprocessors repay the loan directly to the bank
Who will be involved?
Core partners: VIP consortium, microprocessors/vendors, technology developer (KIRDI) and distributors (supermarkets) and MFIs.
Other development agencies in the piloting areas (e.g. HCDA, FPEAK, KEPHIS, KARI, MOA, NGOs) will be involved in supporting the initiative.
KENYA INSTITUTE OF RESEARCH AND DEVELOPMENT (KIRDI)
KIRDI is a parastatal established under the Science and Technology Act, Cap 250, 1979 of the laws of Kenya.
o Its mandate is to undertake research and development in industrial and allied technologies.
oAmong its institutional objective is to contribute to the creation of national wealth through development of technologies that are appropriate and accessible to micro and small enterprises in Kenya
KIRDI’s has been instrumental in :
oDevelopment/reverse engineering of agro-processing machinery and equipment and disseminating the same to small and medium scale food processors in accordance with vision 2030. Examples of equipment already developed and being piloted by KIRDI include: Fruit pulper, Pasteurizer, Blender and Electric drier
o Process and product developmento Establishment of pilot plantso Training, capacity building and consultancy serviceso Business incubation service
KIRDI Roles with VIP Ampath
1. To develop and provide micro-processing equipment directly to the SMES or via existing supermarket chains
2. Training and capacity development of SMEs.3. Future promotion of the business models
NB: KIRDI has well established to undertake the above roles now and in future.
Ampath is set to initiate dialogue with KIRDI
PILOT PHASE: Developing the Serviceo Ampath is working with Equity Bank to develop model
financial products for its clients
o Existing Equity financial products include Fanikisha Imara and Fanikisha Shaba. Aspects that will need to be reviewed are:
o Interest rates and transaction feesoCollateral typesoRepayment and grace periodsoDisbursement/maturity periodsoTarget clients
o Ampath will facilitate business linkages:-Equity-KIRDI -Supermarkets
PILOT PHASE: Stimulating DemandDemand for services during the pilot will be stimulated as
follows:• Direct intervention by VIP partners:
oFPI/ AMPATH will document the business modelsoEPC will disseminate the models in workshops,
seminars, trade shows and mediaoFintrac will establish market linkages:-
microprocessors/vendors – MFIs - Technology developers – Distributors
• Service providers (MFIs, Technology developers and distributors) marketing own services
PILOT PHASE: Stimulating Demand
• VIP will support technology provider, distributors and MFI to market the business models during the pilot stage. NB: KIRDI is already piloting micro processing technologies in some parts of Kenya.
• During the piloting phase KIRDI will test the ability of
microprocessors/vendors to pay for training. VIP Ampath will support KIRDI in this endeavor
• KIRDI training package will include micro processing, entrepreneurship skills and credit management
PILOT PHASE: Target Outreach
• Service Providers
o Technology developer : 1 ( VIP will work with KIRDI which already involved in developing appropriate technology in micro-processing
o Technology distributor: 5 supermarketso MFI:-1 [Equity bank]
• SEs (Microprocessors/vendors): 30 per pilot region x 5 regions = 150• Pilot regions: Eldoret, Mosoriot, Chulaimbo, Kitale and Webuye
Determining Pilot Success
Key determinants of pilot success will include:
oAbility to graduate the very poor urban dwellers and vulnerable from dependency to self reliance
oPotential for high adoption/market uptake
• If the outcomes of the pilot tests on future training of microprocessors by KIRDI will be positive, VIP Ampath will conduct market research and/or stakeholder dialogue to develop detailed market uptake strategy.
o VIP Ampath will strike a deal with KIRDI to continue providing the business development functions (Developing and providing value adding equipment to microprocessors and training them) on wide scale commercial basis)
o VIP Ampath will document the business models for promotion by KIRDI
MARKET UPTAKE – Stimulating Demand
Continued………
o VIP will/might provide initial subsidy to KIRDI to market the business development services to other microprocessors/vendors, banks and supermarkets through media campaigns, seminars and marketing materials
o VIP will phase out any direct subsidies to enable the partner to operate commercially.
MARKET UPTAKE – Stimulating Demand
Continued………..
2. Ampath will facilitate microprocessors/Vendors to establish networks through which information/knowledge would be transferred.
3. The technology developer and distributors will market themselves to microprocessors/vendors
4. Ampath will collaborate with Equity bank, Government supported agencies and not-for profit organizations to spread awareness on the business modelso For example :- KARI-Agriculture information Centre,
Export Promotion Council, NGOs
MARKET UPTAKE – Stimulating Demand
• High target outreach due to successful pilot and effective uptake strategies:
o Micro-processors/vendors (including graduated Ampath clients = 100 per district x 14 districts = 1400
o Distributors = 2 per district x 8 districts = 80o Employees = 500o Sensitized community members = 1000
• TOTAL = 2,980 households equivalent to about 14,900 individuals
MARKET UPTAKE – Target Outreach
EXIT PHASE
• Since the intervention will have been geared towards sustainably, the only remaining functions of VIP at exit will be:
oMonitoring of marketoEstimating the impact of the interventionoEvaluating the intervention to gather
lessons learned relevant to the next program intervention.
INTERACTION WITH OTHER INTERVENTIONS
• Successful financial service products will be dependent on microprocessors/vendors having adequate business management and technical skills in juice production and quality control. Hence….
* Quality control system, Technical and Business Training provider; and Tailored Financial Service
products interventions will be delivered in parallel or as a package
DRAFT WORKPLANSTEP/ACTIVITY TIMEFRAME LEAD PARTNER-SHADOW PARTNERS
A. ENTRY1. Pinpoint geographic area for the pilot2. Assess demand and supply of financial products services/equipment loans3. Conduct stakeholder workshops4. Identify and assess pilot partners- MFI, equipment developer/provider and
distributors5. M & E
Y2 Q1-Yr2Q2
1. AMPATH-Fintrac/EPC2. FINTRAC-AMPATH/EPC3. AMPATH-Fintrac 4. FINTRAC-AMPATH/EPC5. AMPATH-Fintrac/EPC
B. PILOT1. Establish partnerships with service providers- MFI, equipment developer/provider
and distributors2. Establish baseline3. Strengthen the service providers/pilot partners:-, mentoring, advising, and
troubleshooting4. Work with equity bank to develop financial products 5. Document business models6. Disseminate the models 7. Facilitate market linkages 8. Test market uptake strategies-e.g. MPs/vendors ability to pay for training by
KIRDI9. M & Impact assessment
Y2Q3-Y2Q4
1. AMPATH-Fintrac/EPC2. AMPATH-Fintrac/EPC3. FINTRAC-AMPATH/EPC4. AMPATH-Fintrac/EPC5. AMPATH-Fintrac/EPC6. EPC-AMPATH/Fintrac7. FINTRAC-AMPATH/EPC8. FINTRAC-AMPATH/EPC9. AMPATH-Fintrac/EPC
C. MARKET UPTAKE1. Identify and engage a commercial TA Root Source-KIRDI2. Facilitate microprocessors/vendors to establish networks3. M & E Y3 Q1-Y3Q2
1. AMPATH -Fintrac/EPC2. AMPATH/EPC-Fintrac 3. AMPATH -Fintrac/EPC
D. EXIT1. Follow up with service providers MFI, KIRDI, Supermarkets, assess market
sustainability 2. M & E Y3Q2
1. AMPATH -Fintrac/EPC2. AMPATH -Fintrac/EPC